New E.U. environmental standards are changing the global marketplace

Europeans are a wee bit funny when it comes to incubation. During the Middle Ages, they obsessed about the threat from incubi, evil spirits rumored to descend upon women and have their way with them as they slept. Then (in the condensed version of history) came the New Economy, and incubating was all the rage, at least in the Silicon Valleys and Alleys across the Atlantic. Before long, most self-respecting European cities had jumped on board, boasting sparkling high-tech incubators too. Now the tables have turned entirely, and the European Union — far from its bod-fearing roots — has emerged as a leading incubator of new environmental rules and regulations.

Ah, the sweet sounds of electronics recycling.

This trend has a variety of firms in a frenzy. Two factors ensure that the new laws aren’t an issue only for E.U. companies. First, all those wanting to play supply and demand in the region must comply. Second, as California demonstrates in the U.S., there is a tendency for the highest standards prevailing in any key market to dictate the wider market’s evolution — as Europe goes, so might the world. So with sweeping environmental controls coming into effect, some parts of America, Inc. and Asia, Inc. are lying awake at night, plagued by E.U.-inspired nightmares.

Most companies are preparing to face three major new eco-laws. They all bear delightful acronyms: REACH (Registration, Evaluation, and Assessment of Chemical Hazards); RoHS (Restriction of Hazardous Substances); and WEEE (the directive on Waste Electronic and Electric Equipment). All are complex pieces of legislation that will have an impact on a vast spectrum of products, particularly electronics, that are made, sold, used, and disposed of across 25 E.U. member countries.

The least assured of these three, REACH, is currently making the most headlines. This proposed regulatory regime, still wending its way through the European Parliament, would tighten requirements for testing as many as 30,000 chemicals, including many already on the market. The law has had chemical companies and their allies in a blue funk for some time. Thomas Donohue, president of the U.S. Chamber of Commerce, made his feelings known recently with typical American tact: “We’re going to sue the hell out of them on some of this stuff.”

The other two laws have already passed, though they might still be giving Donohue and friends bad dreams. RoHS, which was approved in 2003 and will come into force across the E.U. next July, aims to squeeze six substances out of the E.U. economy: lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBBs), and polybrominated diphenyl ethers (PBDEs). Its controls have left nearly all electronics manufacturers fretting about how to build semiconductors and other components without these important ingredients.

Man, what a waste.

Photo: Nick Gregory.

And then there’s WEEE. For companies that manufacture things like TVs, refrigerators, or cars, this law looms particularly large. Also enacted in 2003, it went into effect last month, setting collection, recycling, and recovery targets for electrical goods. This “take-back” legislation has a lot going for it: It’s fun to say. It has found popular form in the shape of the 23-foot-tall, 3.5-ton, electronic-waste WEEE Man in London. And it has relatively deep, albeit somewhat questionable, roots in Europe.

Germany fathered the take-back industry in the early 1990s with its fabled (or notorious, depending on your view) Ordinance on the Avoidance of Packaging Waste — or Verpackungsverordnung(!). This program shunted the recycling costs of packaging materials back to the companies that made the materials in the first place. It soon added end-of-life accountability for the products themselves to the heap. Unfortunately, Germany found itself sitting atop a mountain of reclaimed materials it didn’t know what to do with, and ended up exporting a great deal to countries with less compunction about burying the stuff. But the experiment was the first step in encouraging companies to recover and reabsorb materials that once would have disappeared into landfills.

Today, major companies from DuPont to Dell are among those affected by the new legislation. Few public protests have been lodged by individual companies so far; of course, much of the industry’s resistance to change goes on behind the scenes, through trade associations. Brand-name companies tend to be particularly leery about speaking out against green initiatives, for fear of upsetting consumers or triggering NGO attacks (a topic for another day).

Ultimately, Europe’s actions raise a number of major questions. Will the new directives genuinely address the underlying environmental challenges? Will they win the support of non-E.U. companies that must now invest in some of the take-back and recycling infrastructure that will be needed? And will they even stick around long enough to make a difference?

On the first question, the jury’s out. On the second, the answer is reasonably certain: once it is clear which rules are here to stay, big companies generally do what is asked. During the battle over the environmental-management standards known as ISO 14000, Japanese and South Korean exporters led the charge; they were determined to stop environmental issues from being used against them as de facto trade barriers. (Indeed, it’s a paradox that non-E.U. companies that have invested over decades in their E.U. footholds tend to be better “Europeans” than many natives.)

On the third question, only time will tell. E.U. Environment Commissioner Stavros Dimas has been under intense pressure from fellow commissioners to stem the flow of new environmental laws. So far, he has largely managed to fight them off. But economic downturn and eastward expansion are blunting the appetite for new legislation, and European Commission President Jose Manuel Barroso has just launched the region’s biggest-ever deregulation campaign, promising to scrap more than 60 draft E.U. laws.

While some may hope that Barroso’s rollback effort will limit the scope of responsibility they face inside the E.U., we don’t see his initiative as an unmitigated disaster for the environment. If the region is to successfully incubate tomorrow’s global rules, environmental issues must be weighed against political and economic health. There’s a balance to be struck — and, while it is clearly trying to push the envelope, the E.U. hasn’t got it right yet. In the meantime, we have our dream: that industry will moderate its reflex lobbying against new laws like REACH, RoHS, and WEEE, and begin to view them as a form of market research instead. A world of opportunity awaits.

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